India’s Export Prospects in Light of US Tariff Changes on China and Mexico

India has a strategic opportunity to increase exports in several key sectors—textiles, electronics, machinery, and pharmaceuticals—due to the potential US tariff hikes on China and Mexico. According to a report from Money Control, US President-elect Donald Trump announced that he would impose a 25% tariff on all imports from Canada and Mexico, along with an additional 10% on imports from China. These tariffs are part of Trump’s broader policy to curb illegal immigration and stop the flow of drugs like fentanyl from China.

Interestingly, India was excluded from these initial tariff measures, despite Trump’s past comments calling India a “tariff abuser.” India’s absence from the tariff list could signal a potential shift towards closer trade ties between the US and India, with some experts, such as Ajay Sahai from the Federation of Indian Export Organisations (FIEO), suggesting that this could pave the way for favorable trade agreements. The US is India’s largest trading partner, with annual trade surpassing $190 billion, and this shift could benefit sectors like textiles, electronics, and pharmaceuticals.

However, there are concerns. Ajay Srivastava, founder of the Global Trade Research Initiative, cautioned that Trump’s trade policies may be broader, and additional measures may be introduced separately, which could put India in a “wait and watch” mode. Philippe Varin of the International Chamber of Commerce warned that any ongoing tariff war between the US and China could lead to negative repercussions for global trade in the medium term.

Another risk lies in the retaliatory actions China might take. For instance, China could reduce export tax waivers, which could harm India’s solar industry—currently reliant on Chinese imports for 80% of its components. Ironically, more than 97% of India’s solar panel exports are sent to the US, making the country particularly vulnerable to any changes in trade dynamics with China.

Overall, while India stands to gain in the short term, especially in the event of an intensified tariff war between the US and China, it must also be prepared for potential challenges in the long term.